PM Monti says 'I quit' over crisis

Prime minister Mario Monti has told Italy's president he is resigning because he can no longer govern after Silvio Berlusconi's party withdrew crucial support.

The move paves the way for early elections a year after the unelected economist helped pull the country back from the brink of financial disaster.

Only hours earlier, 76-year-old billionaire media baron Mr Berlusconi had announced he would run for a fourth term as premier, aiming for a dramatic comeback after he quit in disgrace last November.

The office of President Giorgio Napolitano, who met Mr Monti at the presidential palace for nearly two hours on Saturday, said the premier told the head of state that without the support of Mr Berlusconi's party, "he cannot further carry out his mandate, and consequently made clear his intention to resign" once parliament passed a crucial budget Bill.

Political turmoil in Italy, mired in recession and trying to escape the eurozone sovereign debt crisis, could spook financial markets, which, with Mr Monti at the helm, had steadily regained faith in the country's ability to honour its debts.

Standard & Poor's rating agency, indicating on Friday that it could lower Italy's rating if the recession endured well into 2013, cited "uncertainty" over whether the next Italian government could stay the tough course of austerity Mr Monti's non-partisan government moved through parliament.

Mr Monti is an economist appointed by Mr Napolitano a year ago to head a non-elected government of technocrats that replaced Mr Berlusconi. The premier told Mr Napolitano he would quickly consult political leaders on prospects for swift passage of the "financial stability" budget law critical to soothing market fears.

The presidential palace statement said Mr Monti warned that if MPs did not pull together behind the Bill, it would render "ever more grave the consequences of a government crisis, on a European level as well".

Political instability could send the "spread" -the difference in interest between benchmark German bonds and Italian ones - soaring again. Mr Monti had toiled to shrink the spread.

The Democratic Party's candidate for premier, Pier Luigi Bersani, condemned the "irresponsibility" of Mr Berlusconi's party in "betraying the commitment it made a year ago in front of the nation" to back Mr Monti. Mr Bersani said his party would work "as swiftly as possible" for the law's passage. Once the budget Bill passes, Mr Monti will "hand in his irrevocable resignation in the hands of the president", the presidential palace said.